Commercial real estate borrowing costs remained largely unchanged in Q2 2026. The average all‑in rate dipped by only four basis points versus the prior quarter. According to Altus Group’s US Debt Capital Markets Survey for Q2 2026, 1,794 quotes were collected from 105 industry professionals.
Key Takeaways
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Term SOFR averaged 3.62% in Q2 2026, a decline of just four basis points from Q1 after four consecutive quarters of sharp drops.
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Total quote volume eased 4% to 1,794, and fixed-rate senior short quotes rose 28% as borrowers shifted to fixed-rate products.
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Both Treasury tenors now sit above year‑ago levels for the first time in this cycle, narrowing potential rate relief.
Commercial real estate borrowing costs remained largely unchanged in Q2 2026. The average all‑in rate dipped by only four basis points versus the prior quarter. According to Altus Group’s US Debt Capital Markets Survey for Q2 2026, 1,794 quotes were collected from 105 industry professionals.
Two Years of Falling Benchmarks Come to an End
For nearly two years, SOFR has driven most of the decline in borrowing costs, with each Fed easing cycle pulling down floating all‑in rates. That momentum halted in Q2. Term SOFR averaged 3.62%, a modest 4‑basis‑point decline from Q1 after four consecutive quarters of steep drops. The benchmark remains 70 bps lower than its level a year earlier. Sequentially, however, the downward trend has flattened. The Fed has paused, and expectations of a 2026 rate cut have diminished. Floating‑rate borrowers should not anticipate further relief from the benchmark.
The Details
All‑in rates slipped 4 bps across every property type and subtype, indicating a pronounced slowdown. Q1 recorded a 10‑basis‑point decline, while Q4 2025 saw a 45‑basis‑point drop. Year‑over‑year, the average all‑in rate remains 71 bps lower than a year ago. Construction posted the largest reduction, down 26 bps to 6.08%; office construction led this decline, falling 178 bps to 6.19% after spiking in the previous quarter. Hotel rates increased by 25 bps to 6.07%, marking the biggest rise among property types. Apartment financing stayed the lowest in the survey at 5.22%.
Borrowers Rotate Into Fixed Rate Product
The composition of quotes changed markedly. Fixed‑rate senior short quotes rose 28% to 498, representing 28% of all received quotes—a 7‑percentage‑point increase. Floating senior short quotes declined 16% to 608, shedding 5 percentage points of market share. Overall quote volume eased 4% to 1,794, a 24% drop from Q2 2025. Competition remained strong, with borrowers obtaining an average of 5.3 competitive quotes per financing request. The collateral mix also shifted: retail’s share rose to 20% and office’s to 19%, each gaining ground both quarterly and annually.
Why It Matters
Treasury yields surged sharply, reshaping the economics of fixed‑rate transactions. The 5‑year U.S. Treasury yield averaged 4.09% in Q2, up 32 basis points. The 10‑year yield averaged 4.42%, up 22 basis points. Both tenors now sit above their year‑ago levels for the first time in this cycle.
